Guidance
Notes > an employees right to claim unpaid entitlement
About
this guide
It can be distressing
if your employer has become insolvent and made you redundant.
This guide will help you claim any money you are entitled
to. The guide is not a complete or authoritative statement
of the law, but it should make the process quick and easy.
The amounts given in the guide are those in force at February
2005.
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Introduction
You are entitled
to a redundancy payment from your employer if:
- you are an employee who has been made redundant, and
- you have at least two years' continuous service with
your employer, and
- you are aged between 20 and 64.
If
you are 65 or over, you will not be entitled to a redundancy
payment. You may still be entitled to compensation for notice
pay, unpaid wages or holiday pay you are owed.
If
your employer is insolvent, he or she will not be able to
pay you. So you can claim the money from one of the Insolvency
Services' Redundancy Payments Offices "RPO" using form RP1
which is available from Meston Reid & Co if required.
The RPO may also be able to pay you all or some of any unpaid
wages and outstanding holiday pay. If you did not receive
the correct notice of dismissal, the RPO may be able to
compensate you.
If
your employer is not formally insolvent and has made you
redundant without paying you a redundancy payment, then
you may still be able to claim payment from the RPO but
by law, in these circumstances the RPO can only pay you
redundancy money. It cannot make other payments such as
unpaid wages, holiday pay or compensation for not receiving
proper notice.
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How
to claim
You
should complete form RP1 and send it to the RPO in Edinburgh
. However, if the insolvency practitioner dealing with your
ex-employer asks you to return the form him, please do so.
Please
note: It is the insolvency practitioner's responsibility
to deal with the insolvency process of your employer. The
RPO is only responsible for paying you your redundancy money
and other insolvency-related money to which you may be entitled.
If you have any other concerns about the insolvency, please
raise them directly with the insolvency practitioner.
When
the RPO receive your completed form RP1, your details will
be logged onto their computer system. The RPO will send
you an RP5 acknowledgement form. Please check the details
on this form carefully. If anything is wrong, please let
the RPO know as soon as possible. Wrong information can
affect the amount of money you get and how long it takes
to pay you.
The
RPO will need to carry out some checks on the information
you and the insolvency practitioner provide. This can sometimes
take a little time, but claims are normally dealt with within
6 weeks.
If
you did not get the correct notice upon termination of your
employment, the RPO will send you forms RP2 at the end of
what should have been your statutory notice period.
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How
much money can I get?
Redundancy
pay - The amount of your redundancy payment is
your weekly pay (but only up to a limit imposed by law -
currently £280 a week) multiplied by a number of '
qualifying weeks'. Annex
1 is a ready reckoner for calculating the number of
qualifying weeks applicable to you.
Example:
You are made redundant at the age of 43, having
worked for your employer for 14 years. Your pay at this
time is £300 a week. The ready reckoner shows a
person of your age and length of service as having 15
"qualifying weeks". Your redundancy payment
is 15 x £280
which is £4,200. Tax is not deducted from this amount.
Unpaid
wages - The number of weeks, or part weeks, for
which you were not paid up to a maximum of 8, is multiplied
by your weekly wage up to the maximum of £280 a week.
Income tax and national insurance are deducted from this
amount.
Example:
When you are made redundant you are owed 10
weeks' wages and your pay is £300 a week. The RPO
can pay you 8 weeks (the maximum period allowed) x £280
(the maximum weekly limit) which is £2,240. Remember,
income tax and national insurance are deducted from this
amount.
Compensation
for not receiving notice that you were due - You
are entitled to one week's notice after one month's service
with your employer, two weeks after two years and then one
week for every complete year up to a maximum of 12 weeks.
Your compensation is the number of weeks notice you were
entitled to but did not receive, multiplied by your weekly
wage, up to the maximum of £280 a week. The RPO will
deduct the equivalent of income tax and state benefits from
this amount. If you get another job during all or part of
this notice period, any wages you earn in your new job will
also be deducted. If you do not get another job, you should
claim any state benefits to which you are entitled because
even if you do not claim them, they will be deducted.
Example:
You have worked for your employer for 14 years
and earned £300 a week. So you should have had the
maximum 12 weeks notice, but only received 2. The RPO
would start your entitlement at 10 weeks' notice (the
12 weeks to which you were entitled, minus the 2 weeks
you actually received) x £300, which would be £3,000.
From an amount equivalent to income tax, and state benefits
is deducted. If, after these deductions, the amount is
still over the current limit (10 weeks x the £280
maximum weekly limit), the amount payable will be limited
to £2,800.
Example
if you get a new job: You have worked for your
employer for 14 years and earned £240 a week. So
you should have had the maximum 12 weeks notice, but were
not given any. We would therefore start your entitlement
at 12 weeks notice x £240, which would be £2,880.
From this amount, the RPO will take the equivalent of
income tax, state benefits and your wages from your new
job. In this case the limit at the end of the calculation
would not be applied because, your earnings are less than
the current £280 weekly limit.
Remember:
this payment is to compensate you for the actual loss you
suffered during your entitled notice period. You must keep
your loss to a minimum by claiming all benefits to which
you are entitled, by doing your best to find a new job and
by taking your full salary during the notice period in your
new job.
Note:
tax refunds
Each
year you are allowed to earn a certain amount - called your
personal allowance -before you have to pay tax. If your
total income for the year is less than your personal allowance,
your claim may have been reduced by too much. You will need
to make a claim for a refund but you can only do this at
the end of the tax year. Contact the RPO who dealt with
your claim and ask for form RP13. Return the completed form
with your documents and the RPO will work out any refund
you are owed.
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What
happens if I am owed more than you can pay me?
Because the law only
allows the RPO to pay up to a specified limit (currently,
the maximum is £280 per week), you may still be owed
money. You should claim this from the insolvency practitioner
who is handling your employer's insolvency. You are unlikely
to receive all the money you are owed, but you may get some
of it.
What
is redundancy?
You
can get a redundancy payment only if the reason for your
dismissal is redundancy. This means that your dismissal
must be caused by your employer's need to reduce or no longer
employ the workforce. Redundancy may happen because a workplace
is closing down, because fewer employees are needed for
particular kinds of work, or because the employer is insolvent.
Normally your job must have disappeared. It is not redundancy
if your employer immediately recruits a direct replacement
for you. It will not be relevant if your employer is recruiting
more workers to do different jobs or to work in another
place.
Who
can and who cannot claim?
You
can only receive payment if you are an employee working
under a contract of employment whether written, verbal or
implied. Self-employed people and members of a partnership
do not qualify.
Directors
may be employees if they work under a contract of employment.
Directors may not qualify if they only have a controlling
interest in the company. Thus, for a director to qualify
he, or she, needs to show that he is also an employee working
under a contract of employment and that his relationship
with the company is similar to that of other employees.
Directors will not qualify if they deal only with company
policy and attend board meetings in return for fees.
You
cannot receive payment for redundancy if your employment
ends after you are 65 years old or after you have reached
the normal retirement age for your job. Share fishermen
are not entitled if they are paid only a share in the proceeds
of the catch.
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What
if an employer does not meet his obligation to consult on
proposed redundancies?
If
an employer does not meet the statutory requirement to inform
and consult employees representatives when he proposes to
make 20 or more employees redundant at any one establishment,
the representatives can complain to an employment tribunal.
The exception is in non-union cases where the employer has
not provided for the election of representatives, individuals
can lodge a complaint. Further information is available
from your nearest RPO.
What
if there is no trade union official or elected representatives,
and an outside organisation offers to take on the work for
a percentage of any awarded payout?
You
should think carefully before agreeing to be represented
by such an organisation. The Employment Tribunal Service
is an independent judicial body set up specifically so that
employees and employers can resolve disputes without legal
costs. It is less formal than a court and you do not have
to be represented by a solicitor or other professional.
The Advisory, Conciliation and Arbitration Service "ACAS"
provide free advice on all employment rights and
your local Citizens Advice Bureau will provide free advice.
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How
do I work out my length of service?
The
longest period of continuous service that can be counted
towards a redundancy payment is 20 years. Your length of
continuous service is counted back from the date on which
your notice ended. If your employer gave you less than your
legal entitlement, the extra notice that you should have
had is added. If your employer did give you notice but you
could not work it, this notice is also added to the calculation.
Certain
absences - for example, caused by sickness, pregnancy or
temporary shortage of work - can count towards continuous
service even if your contract of employment was suspended.
Days lost through industrial disputes do not count towards
your continuous service for a redundancy payment but they
do not break your continuous service calculation. Any days
that you were on strike will be deducted from your total
length of service.
Annex
1 helps you to calculate the number of weeks of pay
due. This table is available interactive at: www.dti.gov.uk/er/redundancy/ready.htm
What
is "a week's pay"?
If
you worked the same hours every week and your pay did not
change from week to week - for example with the amount of
work you did - then one week's pay is your basic weekly
wage or salary. Overtime is excluded unless your contract
of employment required your employer to provide overtime
and you to work it.
If
your earnings changed from one week to another - for example,
because of piecework, productivity bonus arrangements or
variable hours - the RPO will calculate your week's pay
by totalling the number of hours you actually worked in
your last 12 weeks of employment and dividing that figure
into your total earnings for the same period. This gives
an average hourly rate that is multiplied by your contractual
hours. If you worked any overtime during these 12 weeks
and were paid at a higher rate, the hours will be included
but the RPO use your normal basic rate in the calculation.
Example:
For the last 12 weeks you have worked 440 hours
including overtime and earned £4,321.20 for this
period. The RPO will divide £4,321.20 by 440 to
give an average hourly rate of £9.82. If your contracted
hours per week are 36 then £9.82 multiplied by 36
gives you a weekly entitlement of £353.52. Remember,
if this amount is more than the weekly limit imposed by
law, then it is the weekly limit that is used to calculate
your entitlement. Payments for sick absence, holidays
etc. are not counted.
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If
you are aged 64 or over
If
you are aged 64 or over, your redundancy payment is reduced
by one-twelfth for each complete month you worked after
your 64th birthday. This means that if you are 65 or over,
you are not entitled to a redundancy payment. You may still
be entitled to compensation for notice pay, unpaid wages
or holiday pay.
What
is insolvency?
If
your employer simply stops trading or closes down a branch
or branches, that in itself is not insolvency. The RPO can
only pay you when your employer is formally insolvent. Usually
this means that an insolvency practitioner has been appointed.
Business
transfers
If
you are dismissed in the course of a transfer of the business
from one owner to another, this is normally treated as unfair
dismissal and not redundancy. You may be able to claim compensation
for unfair dismissal from the new owner.
However, you may be
entitled to redundancy payments if your old employer is
insolvent which could mean an application to an employment
tribunal to deal with any dispute. There are different time
limits for applying and you can get more information on
this subject from the following website : http://www.dti.gov.uk/er/redundancy/consult-pl833.htm
A
business transfer may delay any payment due to you
If
you have made a claim and you are concerned about the delay,
contact the RPO who will do their best to answer your questions
and explain what is happening.
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My
employer is not insolvent but has not given me the redundancy
payment I am due. What can I do?
You
should claim your redundancy pay in writing from your employer
or lodge a written complaint to an employment tribunal within
6 months of your employment ending. You should ask the employment
tribunal to consider what you are owed and who should pay
you. If the tribunal orders your employer to pay, but he
or she does not, you can claim your redundancy pay from
the RPO.
The
RPO cannot pay you any other monies for unpaid wages, loss
of notice or holiday pay, if your employer is not insolvent.
What
can an Employment Tribunal do?
If
you disagree with your employer about your entitlement to
a redundancy payment, you can refer the matter to an employment
tribunal. You may lose your right to a payment if you do
not write to your employer about this or apply to a tribunal
within 6 months of the day your job ends. If you disagree
with what we have paid, you can ask a tribunal to consider
what the payment should be. If you want to apply to an employment
tribunal, you can get the application form from your local
Jobcentre or citizens
advice bureau. Alternatively, why not visit the employment
tribunal website at: http://www.employmenttribunals.gov.uk
Frequently
Asked Questions
How do
I know the RPO are dealing with my claim?
When
the RPO log your claim form onto their computer system,
they will send you form RP5. This shows that they have received,
and are dealing with, your claim and you can check that
the information is correct. If the RPO add or amend information,
they will send you another RP5 to show you the changes.
If you do not receive an RP5 within 3 weeks of submitting
your claim, please contact the RPO.
Should
I claim Jobseeker's Allowance or other benefits while I
am unemployed?
Yes.
You should always claim any benefits to which you are entitled
as soon as possible. If you are claiming notice pay, the
RPO will deduct any benefits payable to you, whether you
claim them or not. The RPO will also deduct any wages you
earn during your notice period. If you have proof that you
are not entitled to any benefits, the RPO will not make
any deductions.
When
will I get my money?
The RPO pay on
average 4 out of 5 claims in 6 weeks or less.
How much
redundancy payment will I get?
The
amount of your redundancy payment is calculated by multiplying
your weekly pay (but only up to a limit imposed by law -
currently £280 a week) by a number of '
qualifying weeks'. Annex
1 is a ready reckoner you can use to calculate the number
of qualifying weeks.
What
about my notice pay?
At
the end of your notice period the RPO will send you form
RP2. You will be entitled to one week's notice pay for each
complete year worked, up to a maximum of 12 weeks. You must
keep your loss to a minimum by claiming any benefits and
taking up any opportunity of paid work. The RPO will deduct
from your notice pay any benefit you could have claimed,
even if you have not claimed it.
What
about my pension?
If
your former employer has not paid certain contributions
into your occupational pension scheme, the administrator
of the scheme may apply to the RPO for these contributions.
Will
I pay tax?
On a redundancy
payment - no.
On arrears of pay
and holiday pay - yes. The RPO will deduct any tax and national
insurance at basic rates before paying you.
On compensation
for not receiving proper notice - see section 4 above.
What RPO
will deal with my claim?
If you worked
in Scotland , the RPO is:
Ladywell House
Ladywell Road
Edinburgh
EH12 7UR
Tel: 0131 316
5613
e-mail: rpo@dti.gsi.gov.uk
These notes have
been drawn from the Insolvency Service booklet "Redundancy
and Insolvency - a guide for employees".
Annex
1 - Ready Reckoner
The amount of your
payment is the number of weeks shown, multiplied by the
weekly limit currently £280, or your actual pay if
this is less than the limit.
Using
your age and number of years of service, the table shows
you how many weeks pay you are entitled to claim.
No-one
below the age of 20 can qualify for a redundancy payment.
If you are aged between
64 and 65, the amount due is reduced by one-twelfth for
every complete month you work after you were 64.
Click
here for the table (pdf file)
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